Realtors reach settlement expected to lower cost of buying, selling a home

The National Association of Realtors on Friday announced a settlement that is expected to dramatically change how Americans buy and sell homes.

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The powerful real estate trade organization announced that it has agreed to pay $418 million over four years to settle cases from homeowners who claimed that they were forced to pay artificially inflated agent commissions when they sold their homes, according to NAR and The Associated Press. The group also agreed to rule changes that homeowners claimed supported 5% to 6% commissions paid by home sellers, The Washington Post reported.

The deal must be approved by a court before it goes into effect. If it’s cleared, real estate agents who list homes for sale on a Multiple Listing Service, or MLS, will no longer be able to use it to offer to pay a commission to agents representing potential homebuyers, according to the AP. Home sellers will still be able to negotiate such offers outside the service, the news agency noted.

Several lawsuits have targeted the real estate industry’s compensation structure, which sees sellers paying a commission that is divided between representatives for both the seller and the buyer, Bloomberg News reported.

Michael Ketchmark, who represents Missouri home sellers in one of the lawsuits against the NAR, told the Post that the agreement would bring about a fundamental change in the real estate market and help lower the cost of home sales.

“There’s no doubt in my mind that this is going to bring about tremendous savings to homeowners,” he said.

Experts told The New York Times that the deal could bring about the biggest changes in the housing market in 100 years.

“This will blow up the market and would force a new business model,” Norm Miller, a professor emeritus of real estate at the University of San Diego, told the newspaper.

Real estate agents in the U.S. have some of the highest standard commission rates in the world, with agents in many other countries seeing a rate between 1% and 3%, the Times reported.

The settlement announced Friday covers a wide swathe of the real estate industry, but excludes some firms. Berkshire Hathaway Inc.’s HomeServices of America and its related companies are not covered as the company continues to litigate a key case, Bloomberg News reported.

If approved, changes to NAR rules will go into effect in mid-July, according to the organization. The group continues to deny any wrongdoing.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” Nykia Wright, the interim CEO of NAR, said Friday in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”

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